Case K2

Judges:
HP Stevens Ch
RE O'Neill M
CF Fairleigh QC

Court:
No. 1 Board of Review

Judgment date: 21 December 1977.

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H.P. Stevens (Chairman): The taxpayer, an employee solicitor, was required as part of his duties to appear in various courts. It was not his practice to wear a suit. On one occasion a barrister called him as a witness and, although he was neatly and tidily dressed, the judge admonished him for not wearing a suit. Since that day he has only worn suits when involved in litigation work.

2. During the year ended 30 June 1974 he acquired a suit for the above purposes and claimed the cost as a deduction. Although the notation in the return form indicated that the suit was ``used only in office'' it was in fact also worn to and from the office. The suit was not distinctive in any way and it was agreed that it would pass unnoticed if worn on public transport.

3. For the taxpayer it was claimed that the cost was allowable in terms of sec. 51(1). He agreed that ``there are numerous precedents going against me and none absolutely, as far as I can see, in my favour''. However because of a change in modes of dress he submitted that the previous cases were distinguishable and said: -

``In my submission an outgoing which is to be excluded as being of a private nature has to be one where it was either acquired for private use - that is the intention - or it is in fact, used for private usages. In my case, my intention and usage was for business purposes only and I conclude by stressing again that I urge the board to take note of changing usages.''

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ATC 14

4. I do not intend to traverse the numerous cases that have been previously decided in relation to clothing. Each relies basically upon its own facts and cannot be determinative in relation to another set of circumstances. What are more relevant are the fundamental principles applicable to sec. 51(1).

5. In this regard it is well established that it is the essential character of the particular expenditure concerned that must be looked at in order to determine whether it is income producing or not, i.e., satisfies the positive limbs of the section -
Lunney and Hayley v. F.C. of T. (1957-1958) 100 C.L.R. 478 ,
Thomas v. F.C. of T. 72 ATC 4094 ,
Lodge v. F.C. of T. 72 ATC 4174 ,
F.C. of T. v. Faichney 72 ATC 4245 and
Ballesty v. F.C. of T. 77 ATC 4181 . It is also well established that, although expenditure might be a prerequisite to gaining income in the sense that, if it is not incurred, none will be gained, this does not mean it necessarily satisfies the positive test of sec. 51(1) since it may be incurred in placing oneself in the position to produce income rather than as the section requires, in the production of that income - Lunney and Hayley v. F.C. of T. (supra), Lodge v. F.C. of T. (supra) and
F.C. of T. v. Maddalena 71 ATC 4161 .

6. Applying these principles to the present case it is my opinion that the expenditure in question does not satisfy the positive requirements of the section.

7. In the circumstances it is strictly unnecessary to consider the negative requirement that an amount not be of a capital, private or domestic nature. If required I would hold that it was of a private nature.

8. For the above reasons I would uphold the Commissioner's decision on the objection.